Gary Shilling: 2012 Recession Still Coming

Economist Gary Shilling says we're still headed for a recession this year despite the market's recent bullish behavior, the Globe and Mail reports.

"Despite the recent euphoria of investors over U.S. stocks, we believe the economy is likely to weaken as the year progresses, led by renewed consumer retrenchment," Shilling wrote in a note to investors.

Shilling points to a number of unusual indicators that suggest the U.S. economy may be weaker than most people believe.

For example, electricity generation is falling rapidly, which this may be because this winter was unusually mild but could also indicate declining economic activity.

Moreover, U.S. rail shipments and the number of containers coming into the ports of Los Angeles and Long Beach, the main entry point for Asian trade in the United States, are both declining.

And while GDP growth has been accelerating recently, Shilling says much of the increase in economic output can be attributed to rising inventories, also not a good sign.

"Either we're dead wrong on the outlook or investors are ignoring reality as they emphasize risk on trades," he says.

Bloomberg reports that John Burbank, founder of $3.8 billion hedge fund Passport Capital LLC, also expects a U.S. economic recession this year or in early 2013.

“We see a recession in 2012 or early 2013 for the U.S. which will be difficult to avoid as Europe contracts and China moderates to 7 percent to 8 percent targeted growth,” Burbank wrote in a note to investors.

“The equity market is confused about true economic growth in the developed world — we believe it will be much lower than forecast.”